Act on Special Measures Concerning Taxation

With regard to the interest and similar income prescribed in Article 23, paragraph (1) of the Income Tax Act, other than that listed in the following items, that a resident or a nonresident with a permanent establishment is to receive in Japan on or after January 1, 2016 (excluding interest and similar income specified by Cabinet Order as that on which withholding at the source prescribed in Article 2, paragraph (1), item (xlv) of the Act is not to be performed (referred to in the following Article as "non-applicable interest"); hereinafter referred to in this Article as "general interest and similar income"), income tax is imposed separately from other income by applying the tax rate of 15 percent on the receivable amount, notwithstanding the provisions of Article 22, Article 89, and Article 165 of the Act.

interest on specified public and corporate bonds (meaning public and corporate bonds listed in Article 37-10, paragraph (2), item (vii) that are listed in Article 37-11, paragraph (2), item (i) or items (v) through (xiv); the same applies in items (iv) and (v));

a distribution of proceeds from a bond investment trust whose public offering of beneficial rights pertaining to its establishment was conducted by way of public offering (meaning a solicitation of offers to acquire prescribed in Article 2, paragraph (3) of the Financial Instruments and Exchange Act (Act No. 25 of 1948) that is specified by Cabinet Order as falling under the case listed in item (i) of that paragraph), or whose beneficial rights fall under the shares, etc. listed in Article 37-11, paragraph (2), item (i);

a distribution of proceeds from a bond-based investment trust under public offering;

interest on public and corporate bonds other than specified public and corporate bonds, which is received by the covered person or any other person specified by Cabinet Order in the case where, on the day on which the payment is determined (for interest on bearer public and corporate bonds, the day on which the payment is made), the corporation that paid the interest on the public and corporate bonds would fall under the category of a family corporation prescribed in Article 2, item (x) of the Corporation Tax Act if that person (hereinafter referred to in this item as the "covered person") or a corporation having a special relationship specified by Cabinet Order with the covered person were selected as a shareholder that forms the basis for the determination;

interest on public and corporate bonds other than specified public and corporate bonds, received from a corporation (hereinafter referred to in this item as a "specified corporation") other than a corporation (hereinafter referred to in this item as a "family corporation") that would fall under the category of a family corporation prescribed in Article 2, item (x) of the Corporation Tax Act if, on the day on which the payment is determined (for interest on bearer public and corporate bonds, the day on which the payment is made), that person (hereinafter referred to in this item as the "covered person") or a corporation having a special relationship specified by Cabinet Order with the covered person were selected as a shareholder that forms the basis for the determination, which, in the case specified by Cabinet Order as a case where the interest is found to be substantively received from the family corporation, the covered person or any other person specified by Cabinet Order receives from the specified corporation.

The provisions of the preceding paragraph do not apply to general interest and similar income to be received by a nonresident with a permanent establishment that does not fall under the domestic source income listed in Article 164, paragraph (1), item (i), (a) of the Income Tax Act.

With regard to the application of the provisions of Article 93 and Article 165-5-3 of the Income Tax Act to a resident or a nonresident with a permanent establishment who receives payment of general interest and similar income, in Article 93, paragraph (1) of that Act, the phrase "distribution of proceeds" is deemed to be replaced with "distribution of proceeds (excluding general interest and similar income (meaning general interest and similar income prescribed in paragraph (1) of that Article to which the provisions of Article 3, paragraph (1) (Separate Taxation on Interest Income) of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957) have been applied; the same applies hereinafter); the same applies hereinafter in this paragraph)", and the phrase "in that paragraph" is deemed to be replaced with "in Article 176, paragraph (3)"; and in Article 165-5-3, paragraph (1) of that Act, the phrase "distribution of proceeds" is deemed to be replaced with "distribution of proceeds (excluding general interest and similar income; the same applies hereinafter in this paragraph)", and the phrase "in that paragraph" is deemed to be replaced with "in paragraph (3) of that Article".

The part of the provisions of Article 224, Article 225, paragraph (1) and Article 228, paragraph (1) of the Income Tax Act and of the following Article that pertains to general interest and similar income to be received on or after January 1, 2016 does not apply to a resident or nonresident who receives the payment of the general interest and similar income, a person who makes the payment, a resident or nonresident who receives the general interest and similar income from a person who receives general interest and similar income as a registered person on behalf of another person in connection with a business, or a person who receives the general interest and similar income as the registered person.

Where a person, who pays the interest and similar income prescribed in Article 23, paragraph (1) of the Income Tax Act (excluding non-applicable interest) payable on or after January 1, 2016 or the dividends, etc. prescribed in Article 24, paragraph (1) of the Income Tax Act (excluding dividends of surplus prescribed in the paragraph (hereinafter referred to in this Section as "dividends of surplus")) pertaining to a distribution of proceeds from an investment trust (excluding a bond investment trust, a specified stock investment trust (meaning a securities investment trust which has as its purpose the management of its trust property through investment exclusively in stocks, whose beneficial rights are listed on a financial instruments exchange as prescribed in Article 2, paragraph (16) of the Financial Instruments and Exchange Act, and which meets other requirements specified by Cabinet Order; hereinafter the same applies in this Section), and a bond-based investment trust under public offering) or a distribution of proceeds from a specified trust that issues beneficiary certificates, to a resident or a nonresident with a permanent establishment, or a domestic corporation or a foreign corporation with a permanent establishment, in Japan, prepares the record set forth in Article 225, paragraph (1) of the Act concerning the payment of the interest and similar income or dividends, etc. for each payment to the same resident or nonresident with a permanent establishment, or the same domestic corporation or foreign corporation with a permanent establishment, as specified by Order of the Ministry of Finance, such person must submit the record to the district director no later than the last day of the month following the month that includes the day on which the payment was determined (for a record concerning interest on bearer public and corporate bonds or a distribution of proceeds based on bearer beneficiary certificates of a loan trust, investment trust (excluding a specified stock investment trust), or specified trust that issues beneficiary certificates, no later than the last day of the month following the month that includes the day on which the payment was made), notwithstanding the provisions of the paragraph.

Where a resident receives, through a person in charge of handling payment in Japan who is specified by Cabinet Order (hereinafter referred to in this Article as a "person in charge of handling payment"), the delivery of interest and similar income prescribed in Article 23, paragraph (1) of the Income Tax Act pertaining to interest on public and corporate bonds issued outside Japan (excluding public and corporate bonds denominated in a foreign currency which are issued by the State or any other person and specified by Cabinet Order (referred to in the following paragraph as "foreign-currency bonds")) or to a distribution of proceeds from beneficial interests in a bond investment trust, which is to be received on or after January 1, 2016, other than that listed in Article 3, paragraph (1), item (i) and item (ii) (limited to that paid outside Japan; hereinafter referred to in this Article as "interest and similar income on general foreign public and corporate bonds, etc."), income tax is imposed on the interest and similar income on general foreign public and corporate bonds, etc. to be received, separately from other income, by applying the tax rate of 15 percent on the receivable amount, notwithstanding the provisions of Article 22 and Article 89 of that Act.

Where a domestic corporation receives, through a person in charge of handling payment in Japan, the delivery of interest and similar income prescribed in Article 23, paragraph (1) of the Income Tax Act pertaining to interest on public and corporate bonds issued outside Japan (excluding foreign-currency bonds) or to a distribution of proceeds from beneficial interests in a bond investment trust or a bond-based investment trust under public offering, which is to be received on or after January 1, 2016 (limited to that paid outside Japan; hereinafter referred to in this Article as "interest and similar income on foreign public and corporate bonds, etc."), the domestic corporation is to be liable to pay income tax on the interest and similar income on foreign public and corporate bonds, etc. to be received, and income tax is imposed by applying the tax rate of 15 percent on the receivable amount.

A person in charge of handling payment in Japan of interest and similar income on foreign public and corporate bonds, etc. paid to a resident or a domestic corporation on or after January 1, 2016 must, when delivering the interest and similar income on foreign public and corporate bonds, etc. to the resident or domestic corporation, collect income tax in the amount calculated by multiplying the amount delivered (where the interest and similar income on foreign public and corporate bonds, etc. is interest and similar income on general foreign public and corporate bonds, etc. and there is an amount of foreign income tax prescribed in the following paragraph, the amount delivered plus that amount) by the tax rate of 15 percent, and pay it to the State by the tenth day of the month following the month that includes the day of collection.

In the cases referred to in the preceding two paragraphs, where there is an amount of foreign income tax prescribed in Article 95, paragraph (1) of the Income Tax Act (including taxes specified by Cabinet Order) imposed at the time of payment on interest and similar income on foreign public and corporate bonds, etc. that a resident or a domestic corporation is to receive on or after January 1, 2016, the following provisions apply:

where the interest and similar income on foreign public and corporate bonds, etc. is interest and similar income on general foreign public and corporate bonds, etc., the amount of the foreign income tax is to be deducted from the amount of income tax on the interest and similar income on general foreign public and corporate bonds, etc. that is to be collected and paid pursuant to the provisions of the preceding paragraph, up to that amount of income tax, and is deemed not to exist with regard to the application of the provisions of Article 95 of the Income Tax Act to the resident;

where the interest and similar income on foreign public and corporate bonds, etc. is interest and similar income on foreign public and corporate bonds, etc. other than interest and similar income on general foreign public and corporate bonds, etc., the receivable amount prescribed in paragraph (2) is the amount remaining after deducting an amount equivalent to the amount of the foreign income tax from the amount of the interest and similar income on foreign public and corporate bonds, etc.

Income tax to be collected and paid pursuant to the provisions of paragraph (3) is deemed to be income tax pertaining to withholding at the source as prescribed in Article 2, paragraph (1), item (xlv) of the Income Tax Act, and the provisions of that Act, the Act on General Rules for National Taxes, and the National Tax Collection Act apply. In this case, where the person who is to receive payment of the interest and similar income on foreign public and corporate bonds, etc. is a domestic corporation, with regard to the application of the provisions of the Corporation Tax Act to the domestic corporation, in Article 68, paragraph (1) of that Act, the phrase "or prize money" is deemed to be replaced with "or prize money, or interest and similar income on foreign public and corporate bonds, etc. prescribed in Article 3-3, paragraph (2) (Separate Taxation on Interest Income from Public and Corporate Bonds, etc. Issued outside Japan) of the Act on Special Measures Concerning Taxation (Act No. 26 of 1957)", and the phrase "that Act" is deemed to be replaced with "the Income Tax Act or the Act on Special Measures Concerning Taxation".

Where a domestic corporation listed in Appended Table 1 of the Income Tax Act, or a financial institution prescribed in Article 8, paragraph (1) (limited to a domestic corporation) or a financial instruments business operator, etc. prescribed in paragraph (2) of that Article (limited to a domestic corporation), receives payment of interest and similar income on foreign public and corporate bonds, etc., if, pursuant to the provisions of Cabinet Order, it has submitted a return stating that it seeks the application of the provisions of this paragraph to the interest and similar income on foreign public and corporate bonds, etc. to be received, and other matters specified by Order of the Ministry of Finance, to the district director via the person in charge of handling payment in Japan of the interest and similar income on foreign public and corporate bonds, etc., the provisions of paragraph (2) and paragraph (3) do not apply to the interest and similar income on foreign public and corporate bonds, etc.

Where income tax is to be collected pursuant to the provisions of paragraph (3) on interest and similar income on foreign public and corporate bonds, etc. other than interest and similar income on general foreign public and corporate bonds, etc., the provisions of Article 8-5 apply to a resident who holds the interest and similar income on foreign public and corporate bonds, etc. as prescribed in item (i) where the interest and similar income on foreign public and corporate bonds, etc. is received from a domestic corporation, and as prescribed in item (i) and item (ii) where the interest and similar income on foreign public and corporate bonds, etc. is received from a person other than a domestic corporation:

the amount to be delivered by the person in charge of handling payment in Japan of the interest and similar income on foreign public and corporate bonds, etc. is deemed to be the amount of interest and similar income to be received as prescribed in Article 8-5, paragraph (4);

the interest and similar income on foreign public and corporate bonds, etc. is deemed to be received from a domestic corporation.

A domestic corporation, financial institution, or financial instruments business operator, etc. prescribed in paragraph (6) may, in lieu of submitting a return under that paragraph, provide the person in charge of handling payment referred to in that paragraph with the matters to be stated in the return by electronic or magnetic means (meaning a means using an electronic data processing system or any other means using information and communications technology). In this case, the domestic corporation, financial institution, or financial instruments business operator, etc. is deemed to have submitted the return to the person in charge of handling payment.

Beyond what is prescribed in paragraph (5) and the preceding two paragraphs, special provisions on the provisions of Article 224 and Article 225 of the Income Tax Act concerning interest and similar income on foreign public and corporate bonds, etc. and other necessary matters concerning the application of the provisions of paragraphs (1) through (4) and paragraph (6) are specified by Cabinet Order.